KCSE Business Studies Topical Questions and Answers

Explain five features of oligopoly. (10 marks)

1/12/2021

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Explain five features of oligopoly.

Features of oligopoly include:

Firms are interdependent in decision making. Firms keenly observe each others’ actions/decision hence acting in any way triggers counter reactions (from other firm s).
Firms deal in products that are homogenous or similar. The products are close substitutes of each other and are only differentiated in terms of aspects like colour/packaging/shapes/pricing/branding.
Firms may engage in non-price competition/collusive oligopoly. The firms under oligopoly may avoid price wars hence only compete via other means like aggressive advertising/after sales services/market segmentation/fixing quotas.
Unpredictability of behaviour/uncertainty since firms under oligopoly keep reacting to market changes differently/actions taken by other firms within the market may take others by surprise.
The market is made up of a few large firms since such firms operating under oligopoly tend to have a large capital outlay/make extensive use of modem technology in their production activities/control substantial share of the market.
There are limiting factors such as large capital investment required to be a player in this market/the level of technology involved may keep off possible entrants into the market/intimidation/collusion.
Firms may engage in price wars/rivalry/cut throat competition which may lead to survival/collapse of some firms.
May lead to price rigidity/kinked demand occasioned by fear of other firms’reactions.
There may be price leadership where the dominant firm dictates the market price/rules the market.

Explain five features of oligopoly. (10 marks)

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With the aid of a diagram, explain the effect of an increase in the supply of a commodity while its demand remains constant.

21/12/2020

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With the aid of a diagram, explain the effect of an increase in the supply of a commodity while its demand remains constant.

Other factors remaining the same, the price of a commodity will fall from P0 to P1 as the quantity supplied changes from Q0 to Q1.
This creates a new equilibrium E1 from E0 as supply curve shifts to the right from S0S0 to S1S1.
The increase in supply causes excess supply/surplus.
This lowers price to the new equilibrium price oP1 and equilibrium quantity oQ1.

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Explain four ways through which a public limited company may be dissolved.

21/12/2020

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Explain four ways through which a public limited company may be dissolved.

Ways through which a public limited company may be dissolved include:

A resolution by the shareholders to dissolve the company. When there is a unanimous decision by the shareholders to wind up the company during the annual general meeting.
Change in the country’s law that renders the activities of the company illegal/unlawful. When the laws of a country bars certain activities that the company may have been involved in.
Inability to repay financial debts on infringement of stakeholders’ rights.
Amalgamations/mergers - a company may be dissolved if it combines with another and a new one replaces the one combining/creates a new entity.
Take overs/acquisition/absorption - a company may be dissolved if it is taken over by another/or by the government through acquisition of majority shares hence redirection of its activities/loss of identity.
Realization of sustained / continuous losses. A company may be dissolved when it makes losses continuously to the extent of not being able to meet its recurrent expenditure/insolvency.
Court order for infringing on the law/granted to a complaint raised by stakeholders/acting ultravires.
Completion/fulfilment of task/activity/objective (for which the company was formed) hence making its continued existence unnecessary.
Failure to commence business within one year after incorporation thus contravening the company’s act.

Explain four ways through which a public limited company may be dissolved.

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Outline six circumstances under which a trader may use air transport.

21/12/2020

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Outline six circumstances under which a trader may use air transport.

Circumstances under which a trader may use air transport:

Perishable nature of goods since they go bad/get damaged.
Goods are of high per unit value since they are prone to theft.
Urgency - where goods require to arrive al the destination promptly.
Security - where security of goods is of valuable consideration.
Where other means of transport are unavailable.
Where distance to be covered is too large.
Where it ¡s the policy of the business which needs to be followed.
Where destination is remote making it inaccessible by other means.

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On 1st January 2011 , Jumo Traders had shs 22,500 in cash and shs 250,000 at bank.During the month, the following transactions took place:

21/12/2020

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On 1st January 2011 , Jumo Traders had shs 22,500 in cash and shs 250,000 at bank.During the month, the following transactions took place:

Prepare a duly balanced three column cash book. (10 marks)

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Explain five advantages of advertising to the consumer.

21/12/2020

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Explain five advantages of advertising to the consumer.

Advantages of advertising to the consumer include:

Consumers become aware of existence of a product and where it can be found.
Consumers enjoy high quality goods resulting from competitive advertising/Producers seek to maintain very high standards of quality.
Makes it easy for consumers to choose products from a variety offered in the market based on their advertised quality and contents.
Protects consumers from exploitation since they are aware of prices and quality of items and can therefore enforce their rights.
Communicates changes about the producer like new product lines, change of name and physical address. This enhances convenience for the customers.
Educates the consumers on the proper use of products where advertising messages involve demonstrations of product u sage.
Entertainment by use of drama/music/plays.
Aiding budget planning as they are made to know about price and existence of goods.
May enjoy lower prices due to competition.
Correct misconceptions hence assist in making decisions.

Explain five advantages of advertising to the consumer.

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The following balances were extracted from the books of Soilo Traders on 31 December 2010.

21/12/2020

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The following balances were extracted from the books of Soilo Traders on 31 December 2010.

Additional information:
Gross profit margin is stated at 40%.
Prepare:
(i) Trading, Profit and Loss Account for the year ended 3Pt December 2010. (5+ marks)
(ii) Balance sheet as at 3P’ December 2010.

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Explain five benefits that may be realized by a country as a result of government policy to relocate industries to rural areas.

21/12/2020

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Explain five benefits that may be realized by a country as a result of government policy to relocate industries to rural areas.

Benefits that may he realized by a country as a result of government policy to relocate industries to rural areas include:

Increased availability of variety of goods and services as a result of new businesses in the area.
Availability of auxiliary services - citizens would enjoy more and better auxiliary services like transport.
Increased job opportunities - there will be more jobs available that would reduce unemployment.
Increased utilisation of locally available resources - locally available factors of production will be used and the citizens would earn rewards associated with them.
Improved standard of living as development of the rural areas increases the quality and variety of goods and services.
Reduced congestion in towns - this would benefit the few citizens remaining in the city.
Balanced economic development as economic activities are spread throughout the country.
Transfer of technology to rural areas which leads to production of better quality goods/services.
Creation of market for goods/services produced in rural areas.

Explain five benefits that may be realized by a country as a result of government policy to relocate industries to rural areas.

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Explain five factors that may hinder economic development in Kenya.

21/12/2020

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Explain five factors that may hinder economic development in Kenya.

Factors that may hinder economic development in Kenya include:

Inaccessibility to appropriate technology leading to low quality/quantity.
Inadequate research data. .
Poor development planning.
Inadequate skilled labour force.
inadequate natural resource endowment.
Brain drain-skilled man power seeking greener pastures elsewhere.
Low demand for goods/services.
Negative socio-cultural practices.
Inadequate/lack of foreign exchange.
Poor governance/corruption.

Explain five factors that may hinder economic development in Kenya.

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Explain five benefits that Kenya may get as a member of C.O.M.E.S.A.(10 marks)

21/12/2020

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Explain five benefits that Kenya may get as a member of C.O.M.E.S.A.

Benefits that Kenya may get as a member of COMESA include:

Free flow of goods and services.
Expanded market for goods and services.
Reduced costs of operating businesses as a result of increased scale of operation.
Production of competitive/quality goods and services.
Possibility of political cooperation.
Increased variety of goods to choose from.
Improved infrastructure to facilitate conduct of business.
Creation of employment opportunities due to increased trading.
Attracts investment due to greater demand.
Lower prices of goods due to abolition of tarrifs.
Encourages specialization where countries enjoy comparative advantage.

Explain five benefits that Kenya may get as a member of C.O.M.E.S.A.(10 marks)

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Outline five characteristics of an efficient tax system.

21/12/2020

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Outline five characteristics of an efficient tax system.

Characteristics of an efficient tax system are:

Equity - the tax should be fair and just/people should be taxed according to their income.
Economical - it should be cheap and easy to administer/cost effective/cost of collecting should be lower than the revenue.
Convenient - method of payment should be convenient to the tax payer/favourable to tax payer.
Certainty - tax payer/collector should know what, when and how to pay/collect.
Flexibility - where tax is used as an instrument of national policy, it should be adaptable to all circumstances.
Simplicity - it should be easily understood.
Elasticity - proceeds from taxation should be capable of expanding/contracting in line with changes in income/population.
Diversity/wide base. There should be wide range/variety of taxes/should net many tax payers.
Difficult to evade. Should not create loopholes for people to avoid.
Should regulate the economy.

Outline five characteristics of an efficient tax system.

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Explain five benefits that may accrue to a country with a large proportion of skilled labour force.

21/12/2020

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Explain five benefits that may accrue to a country with a large proportion of skilled labour force.

Benefits that may accrue to a country with a large proportion of skilled labour force Include :

Saving on foreign exchange that would have been used to pay expartriates/imported labour.
Production of high quality goods/services as the workers are experts in their respective areas.
Increased output of goods/services as the workers are competent due to exploitation of resources.
Reduction in cost of production since the labour tends to be efficient/less wasteful.
Increase in purchasing power/demand due to higher incomes/salaries earned.
Reduction in dependency ratio since the employment rate is higher.
Enhances creativity/innovation/research leading to new/improved/variety of goods? services.
Promotes specialization/division of labour leading to faster production.
Easen/simplify setting of wage/employment policy due to abundance/availability of skilled labour/may reduce labour stife/unrest.
Increased government revenue due to income taxes levied.
Increased foreign exchange due to export of skilled labour.
Enhances entrepreneurial culture since skilled labour is more willing to undertake risks.
Adaptability/flexibility as they are ready to embrace changes

Explain five benefits that may accrue to a country with a large proportion of skilled labour force.

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State four reasons for privatizing public corporations.

21/12/2020

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State four reasons for privatizing public corporations.

Reasons for privatizing public corporations.

To improve efficiency in their operations.
To generate revenue to the government through sale of shares and taxes.
To enhance competition.
To increase public participation in economic activities of the country.
To reduce government expenditure.
To comply with conditions set by development partners and international donor agencies.
To enable the government to concentrate on other state responsibilities.
To minimize political interference.

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Highlight four factors that a trader may consider when choosing a means of transport.

21/12/2020

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Highlight four factors that a trader may consider when choosing a means of transport.

Factors that a trader may consider when choosing a means of transport include:

Nature of goods - whether they are bulky, perishable or fragile.
Speed/urgency - where goods are to be delivered quickly.
Cost of transport - should be economical.
Distance to be covered.
Availability of the means.
Packaging requirements for the goods.
The risks involved.
Availability of terminals.
Reliability of the means.
Flexibility.
Comfortability.
Need for special services.

Highlight four factors that a trader may consider when choosing a means of transport.

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Outline four circumstances in which the government may be involved in business.

21/12/2020

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Outline four circumstances in which the government may be involved in business.

Circumstances in which the government may be involved in business include:

When a business venture requires investment of large sums of money which individual entrepreneurs may not provide.
When the goods or services to be provided are essential to the welfare of the citizens.
When there is need to protect citizens from exploitation by private entrepreneurs.
When the government desires to create employment for the citizens.
When the government needs to generate income through revenue collection.
When there is need to safeguard national security.
When the venture is strategic but provides low profits hence unattractive to private investors.
Where there are monopolies in the economy, the government gets involved in business to increase competition.
Where there is need to balance regional development.
To reduce foreign dominance in the economy.
Where there is need to attract foreign investment.

Outline four circumstances in which the government may be involved in business.

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Outline four features of a parastatal.

21/12/2020

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Outline four features of a parastatal.

Features of a parastatal include:

Provide essential services.
Not profit motivated.
Is formed by an Act of Parliament.
Is mainly funded by the government.
Is managed by government appointees.
Any surplus earned is surrendered to the government.
Has limited liabilities.
Attachment to a government ministry.
Can be dissolved only through an act of parliament.

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State four basic features of a market.

21/12/2020

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State four basic features of a market.

Basic features of a market include:

Availability of buyers.
Availability of goods/services.
A platform for conducting transactions.
Availability of sellers.
Availability of medium of exchange.
Freedom to buy and sell.

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Outline four positive effects that production activities may have on community health.

21/12/2020

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Outline four positive effects that production activities may have on community health.

Positive effects that production activities may have on community health include:

Provision of safe products.
Provision of clean water.
A source of income which can be used to access medical services.
Provision of labour/occupation which leads to reduced stress and a chance to keep fit while working.
Provision of health facilities as a social responsibility.
Provision of recreational facilities.
Provision of health education to fight against diseases.
Provision of sewerage disposal plants which boosts community sanitation.
Planting trees

Outline four positive effects that production activities may have on community health.

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Highlight four factors that may cause the supply curve to shift to the right.

21/12/2020

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Highlight four factors that may cause the supply curve to shift to the right.

Factors that may cause the supply curve to shift to the right include:

Reduced cost of production.
Bumper harvest.
Increase in the price of complementary goods.
Government incentives to producers e.g. subsidy.
Entry of new firms into the market.
Reduced price of substitute goods.
Improved production methods.
Reduced incidences of industrial strikes.
Availability of the factors of production.
Future expectation of a fall in price.

Highlight four factors that may cause the supply curve to shift to the right.

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Outline four qualities of a successful salesperson.

21/12/2020

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Outline four qualities of a successful salesperson.

Qualities of a successful sales person include:

Has adequate product knowledge.
Is a good communicator.
Is sensitive to customer needs.
Has a high sense of integrity1honesty
Is presentable (neat and well groomed).
Is persuasive.
Has a high level of commitment.
Good listener.
Have good command of language,
Polite and courteous.
Persistent and patient

Outline four qualities of a successful salesperson.

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State four benefits of a bonded warehouse to the government.

21/12/2020

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State four benefits of a bonded warehouse to the government.

Benefits of a bonded warehouse to the government include:

A source of data for planning purposes.
Enable the government to control entry of harmful goods.
Enable the government to inspect goods while still under bond.
Enables the government to regulate the quantity of imports.
The government uses it to check illegal goods entering the country.
A source of revenue from customs duty.
Enable verification of documents on transit.
Enable checking of the quality of goods.

State four benefits of a bonded warehouse to the government.

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Highlight four benefits that a country would get by developing her infrastructure.

21/12/2020

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Highlight four benefits that a country would get by developing her infrastructure.

Benefits that a country would get by developing her infrastructure include:

Attraction of foreign investment.
Creation of employment opportunities.
Improved security.
improved health.
increased production levels.
Enhanced movements of goods and services.
Increased per capital! income.
Increased exploitation of available resources.
Increased entrepreneurial activities.
Easier/faster communication.
Reduced cost of production.
Equitable development.

Highlight four benefits that a country would get by developing her infrastructure.

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Outline four factors that may make a producer to by-pass the wholesaler when distributing goods.

21/12/2020

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Outline four factors that may make a producer to by-pass the wholesaler when distributing goods.

Factors that may make a producer to by pass the wholesaler when distributing goods include:

Having own retail outlet.
Dealing in perishable goods like bread which require shorter channels.
Dealing in technical goods which require elaborate after sales services.
Consumers and retailers buying in large qualities.
Need to keep price of goods low.
Limited geographical spread of the market.
Government policy.
When the production is in small quantity.
Where the producer has enough storage facilities.
When goods are produced on order.

Outline four factors that may make a producer to by-pass the wholesaler when distributing goods.

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Outline four measures that a country can take to reduce the level of inflation.

21/12/2020

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Outline four measures that a country can take to reduce the level of inflation.

Measures that a country can take to reduce the level of inflation include:

Increase income taxes to reduce the disposable income available to consumers.
Reduce government expenditure.
Introduce compulsory saving schemes like Pension Fund.
Reduce exports.
Enforce wage guidelines to control wage increase.
Control prices by legislation.
Increase interest rates on loans.
Increase imports in case of shortages.
Raising the margin requirements.
Regulate printing and minting of money.
Use of buffer stocks to stabilize prices.

Outline four measures that a country can take to reduce the level of inflation.

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Name four documents that may be required by the registrar of companies in order to register a public limited company.

21/12/2020

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Name four documents that may be required by the registrar of companies in order to register a public limited company.

Documents that may be required by the registrar of companies in order to register a public limited company include:

Articles of Association.
Memorandum of Association.
Prospectus.
List of directors.
Declaration.
Statement signed by directors.

Name four documents that may be required by the registrar of companies in order to register a public limited company.

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Explain five features of oligopoly.

With the aid of a diagram, explain the effect of an increase in the supply of a commodity while its demand remains constant.

Explain four ways through which a public limited company may be dissolved.

Outline six circumstances under which a trader may use air transport.

On 1st January 2011 , Jumo Traders had shs 22,500 in cash and shs 250,000 at bank.During the month, the following transactions took place:

Explain five advantages of advertising to the consumer.

The following balances were extracted from the books of Soilo Traders on 31 December 2010.

Explain five benefits that may be realized by a country as a result of government policy to relocate industries to rural areas.

Explain five factors that may hinder economic development in Kenya.

Explain five benefits that Kenya may get as a member of C.O.M.E.S.A.

Outline five characteristics of an efficient tax system.

Explain five benefits that may accrue to a country with a large proportion of skilled labour force.

State four reasons for privatizing public corporations.

Highlight four factors that a trader may consider when choosing a means of transport.

Outline four circumstances in which the government may be involved in business.

Outline four features of a parastatal.

State four basic features of a market.

Outline four positive effects that production activities may have on community health.

Highlight four factors that may cause the supply curve to shift to the right.

Outline four qualities of a successful salesperson.

State four benefits of a bonded warehouse to the government.

Highlight four benefits that a country would get by developing her infrastructure.

Outline four factors that may make a producer to by-pass the wholesaler when distributing goods.

Outline four measures that a country can take to reduce the level of inflation.

Name four documents that may be required by the registrar of companies in order to register a public limited company.

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